How will the U.S. economy perform in the second half of the year? In-depth analysis from three major investment banks: growth under pressure, structural differentiation, and policy games

According to the Zhitong Finance APP, recently, Goldman Sachs, Morgan Stanley, and Bank of America have successively released economic reports for the United States in August, providing detailed assessments of the economic trends, core sector performance, and policy directions for the second half of 2025. Based on the views of these three major investment banks, the U.S. economy in the second half of 2025 is expected to exhibit characteristics of "weak growth, high differentiation, and multiple disturbances," with tariff disruptions, changes in the labor market, and Federal Reserve policy directions being the three major variables affecting the overall situation. From an investment perspective, Goldman Sachs suggests focusing on opportunities in the export sector brought about by the narrowing trade deficit, Morgan Stanley recommends "high-quality cyclical stocks" and investment-grade credit bonds, while Bank of America advises avoiding high-leverage industries sensitive to interest rates.

1. Slowdown in Growth Becomes a Foregone Conclusion: Full-Year Growth Difficult to Reach Potential Levels, Possible "Below 1" in the Second Half

Goldman Sachs clearly pointed out in its "U.S. GDP" report that the annualized growth rate of U.S. GDP in the first half of 2025 is only 1.2%, which not only falls below its estimated potential growth rate of 2% but also below market expectations at the beginning of the year, essentially aligning with predictions made after the tariff increase outlook was clarified in April. Behind this growth rate is a stark contrast between the "unexpected weakness" in core sectors such as consumption and housing and the "counter-cyclical growth" in business investment.

Looking ahead to the second half of the year, Goldman Sachs expects the growth rate in the third and fourth quarters to further slow to 1% (annualized), with the quarter-on-quarter growth rate in the fourth quarter only at 1.1%, consistently below potential levels. The core logic is that domestic final sales (consumption + investment + government spending) remain basically flat, relying only on the narrowing trade deficit and inventory rebound for weak support.

Morgan Stanley holds a similar view in its "Key Forecasts," believing that due to the dual drag of tariff impacts and immigration restrictions, the actual GDP growth rate in the U.S. will decline from 2.3% in 2024 to 1.0% in 2025, with a slight rebound to 1.1% in 2026. It is noteworthy that Morgan Stanley analyzes the slowdown in U.S. economic growth within a global context: the global economic growth rate is expected to decline from 3.5% in 2024 to 2.6% in 2025, with the U.S. and global growth "synchronizing in their slowdown," but with greater disturbances from domestic policies.

2. Core Sector Differentiation Intensifies: Consumption "Slows Down," Housing "Drags Down," Investment "Strong at First, Weak Later"

(1) Consumption: Rising Savings Rate Suppresses Spending, Tariffs Increase Inflation as New Pressure

Goldman Sachs data shows that the growth rate of U.S. real consumer spending in the first half of 2025 plummets to around 1%, only half of the expectations at the beginning of the year, and this slowdown occurs before the full impact of tariff "tax-like" shocks is realized. The core reason is that the savings rate rises from 3.5% in December 2024 to 4.5% in June 2025, indicating a clear trend of households "actively deleveraging."

Goldman Sachs further predicts that consumer spending growth in the second half of the year will only be 0.8%, with three major factors contributing to the suppression: first, the weakening employment growth; second, tariffs pushing up commodity prices (core PCE inflation may continue to exceed 2.5%); third, reduced fiscal transfer payments in the fourth quarter (cuts to Medicaid and SNAP benefits in the new fiscal bill will directly impact low-income families) Bank of America added in the "U.S. Economic Outlook" that while July credit card spending data showed a rebound (BAC aggregate data indicated a weekly growth rate recovery to 0.9%), it reflects more of a price increase rather than actual demand expansion. The rise in core commodity prices due to tariffs (June core commodity PCE month-on-month increase of 0.53%, the highest since January 2023) is weakening residents' purchasing power.

(2) Housing: High interest rates + Decrease in immigration, becoming the biggest "drag" on the economy

Goldman Sachs clearly lists housing as the "weakest sector in the second half of the year," expecting an annual decline of 8%, continuing the 3% decline trend from the first half of the year. Specifically, single-family home construction is expected to see a brief rebound in Q4 2024, but will contract again starting February 2025 due to high mortgage rates (10-year U.S. Treasury yield remaining above 4%) and deteriorating affordability (the home price-to-income ratio is at a historical high); multi-family housing is also facing slow inventory digestion and continued low new starts.

More concerning is that the decrease in immigration is changing the fundamental demand for housing. Goldman Sachs pointed out that the slowdown in the growth of the foreign-born population is leading to a decline in household formation rates, while Bank of America data shows that from April to July 2025, the foreign-born labor force will decrease by 802,000, further weakening housing demand. Goldman Sachs' chart indicates that new single-family home starts are expected to drop to 700,000 units (annualized) in 2025, the lowest since 2020.

(3) Business Investment: "Unexpectedly Strong" in the first half, "Debt Repayment Style Decline" in the second half

Business investment grew by 6% in the first half, far exceeding market expectations (Goldman Sachs predicted 3% at the beginning of the year). After excluding the contribution from the first quarter's technology equipment "import rush" (to avoid tariffs), the actual growth rate is about 3%. Goldman Sachs analyzes that this is closely related to the easing financial environment — the U.S. financial conditions index significantly fell back after a brief tightening in the first quarter, currently close to the loosest level in nearly three years, partially offsetting the impact of policy uncertainty.

However, the situation will reverse in the second half. Goldman Sachs predicts a 0.6% annual decline in business investment, primarily due to the "repayment effect": the 2.9 percentage point growth brought by the front-loaded equipment imports in the first quarter will turn into a drag in the second half; at the same time, the construction boom from 2022-2023 is waning, and the weakness in the construction industry will continue. However, investment incentive policies in the new fiscal legislation may provide some buffer.

III. Tariff "Double-Edged Sword" Effect: Short-term Disruption of Trade, Long-term Reshaping of Deficits

Tariff policy is the core variable running through the three reports, with its impact showing characteristics of "short-term fluctuations, long-term trends."

Goldman Sachs pointed out that the tariff increases in the first half led companies to "rush to import," with net exports and inventory dragging GDP down by 0.3 percentage points in the first quarter, while in the second quarter, it boosted GDP by 0.2 percentage points, resulting in an overall drag on the growth rate of only 0.1 percentage points in the first half However, the situation will change in the second half of the year: high tariffs will lead to a significant reduction in import demand, while a weaker dollar (Morgan Stanley predicts that the euro will rise to 1.20 against the dollar by the end of the year) and limited foreign countermeasures will support exports. It is expected that the trade deficit as a percentage of GDP will narrow from 3.1% at the end of 2024 to 2.4%.

Morgan Stanley warns of the "global spillover effect" of tariffs: the contraction of U.S. import demand will impact the manufacturing sector in the Eurozone (which has raised its growth forecast for the Eurozone but emphasizes the downside risk of tariffs) and Chinese exports (although China is partially offsetting through policy stimulus, structural deflationary pressure remains). In addition, Morgan Stanley's data shows that core commodity prices, which are significantly affected by tariffs, have consistently been higher than those of low-tariff exposed goods since February 2025, indicating a clear characteristic of "structural inflationary uplift."

IV. Federal Reserve Policy Game: Bank of America "Hawkish," Morgan Stanley "Dovish," with Threefold Contradictions Behind the Discrepancy

Regarding whether the Federal Reserve will cut interest rates, the three major investment banks show significant differences, fundamentally based on differing judgments about the "inflation - employment - growth" triangular relationship.

Bank of America insists on "no interest rate cuts within the year," with three core arguments:

First, inflation has not reached the target, with core PCE exceeding 2% for 18 consecutive quarters, and the impact of tariffs may keep inflation above 2.5% into early 2026;

Second, the labor market has not shown signs of loosening, with the unemployment rate stable at 4.1%-4.2% and wage growth maintaining at 3.9% (annualized), while the decrease in foreign-born labor exacerbates supply constraints;

Third, there are signs of economic rebound in July (automobile sales and air travel both exceeded the same period in 2024), and premature interest rate cuts may trigger "secondary inflation."

Morgan Stanley predicts a 175 basis point rate cut in 2026, reasoning that slowing economic growth will gradually suppress inflation (with core PCE dropping to 2.5% in 2026), and that the cooling of the job market is evident (the unemployment rate may rise to 4.4% in the fourth quarter). Morgan Stanley also points out that the yield on 10-year U.S. Treasury bonds will drop to 4.00% by the end of 2025, as the market is pricing in easing expectations in advance.

Goldman Sachs, while not directly predicting the timing of rate cuts, emphasizes the impact of policy uncertainty—looser financial conditions have been key to the resilience of business investment in the first half of the year, and if policies shift to tightening in the second half (such as inflation concerns triggered by tariffs), it may exacerbate investment volatility.

V. Risks and Opportunities: The "Discrepancy Points" and "Consensus Areas" of the Three Major Investment Banks

Consensus Areas:

Economic growth below potential levels will become the norm, with little chance of a "strong rebound" in 2025;

Tariffs are a core variable, affecting trade balance and transmitting to consumption through inflation;

The weak housing market will persist, becoming a "stable drag" on economic growth.

Discrepancy Points:

Goldman Sachs is more focused on the "uncertainty" of inventory and trade, believing that the pace of front-loading imports may disrupt growth forecasts;

Morgan Stanley warns that the market is "overly optimistic," with risk asset valuations already pricing in a "soft landing," but policy fluctuations may trigger a correction; Bank of America emphasizes the "stagflation risk," where slow growth coexists with high inflation, and the Federal Reserve has very little room for policy error.

Conclusion

Based on the views of three major investment banks, the U.S. economy in the second half of 2025 will exhibit characteristics of "weak growth, high differentiation, and multiple disturbances."

For investors, Goldman Sachs recommends focusing on opportunities in the export sector brought about by a narrowing trade deficit, Morgan Stanley suggests "quality cyclical stocks" and investment-grade corporate bonds, while Bank of America advises avoiding high-leverage industries that are sensitive to interest rates